Tag Archives: property market

Struggling to buy a home in Australia? It can be frustrating, especially when you have to compete with investors snatching up houses for sale on every corner.

Housing values in the country have been on the up, driven mainly by prices of real estate in Sydney and Melbourne. This is partially thanks to the 2 per cent cash rate that has pushed interest rates on home loans to record lows.

To combat the risk of a market crash, the Australia Prudential Regulation Authority (APRA) has put countermeasures in place, including a ten per cent limit on investment credit yearly growth. While not technically enforced, this suggested target aims to restrict lending to investors to help cool rising prices.

So the big question is, is this solution working?

A look at the numbers will seem to suggest – yes.

Owner occupation on the rise

According to the Housing Industry Association (HIA), home loans for owner-occupier housing increased in August by 2.5 per cent. HIA Economist Diwa Hopkins also notes that “lending to investors seeking to construct housing fell away sharply during the month”. This means that more financing is being shifted away from investors and put toward owner-occupiers.

Furthermore the Australian Bureau of Statistics show that the dwelling commitment values for this type of property increased by 6.1 per cent (seasonally-adjusted estimate) from July to August. Meanwhile, it decreased by 0.4 per cent for investment housing.

As the APRA continues to crack down on banks exceeding the 10 per cent ‘speed limit’, you can expect to see the real estate market be less and less heated in the months to come. If you’re looking to buy a home you can settle in, it’s important to be ready to snatch up a property for sale that suits your needs.

When it comes to living in Australian property, purchasing with home loans seems to be the default choice. For many, there’s a general impression that renting property is some kind of short-term bridge between leaving your family and buying your first home.

But if you’ve had your eye on real estate news for the last few years, you’ll notice that purchasing real estate in Australia is getting increasingly difficult, particularly in certain capital cities.

While there are many great perks and benefits from owning property, there are also key advantages to renting that make it an appealing option.

Affordability

Affordability is a big factor for anyone. In this field, the case for renting seems to have the upper hand.

The Housing Industry Association reported in June that the National Affordability Index dropped by 2.9 per cent. Sydney and Melbourne saw the greatest decreases, at 6.9 and 9.1 per cent respectively. This demonstrates that housing prices are rising faster than people’s earnings.

While people with low interest home loans can still find ways to adapt and purchase property, it outlines just how comparatively affordable renting could be.

The deal with yields

The best way to observe this comparison is not just to examine rental rates, but to take a look at yields. Sure, rates can give you a snapshot into how much it’ll cost you per week, but this alone will not give you a holistic view.

Yield figures on the other hand, will show you how renting stacks up to buying property in the current market, which is the real contest here. This can be defined as the percentage of rental income to the home’s purchase price.

For instance, CoreLogic RP Data research notes that the median rental price for a Sydney house was $610 in July. This figure might seem high and have you consider buying instead.

However, figures reveal that Sydney’s rental yield was down 0.2 per cent over the quarter, and decreased by 0.6 per cent over the year to July. This shows that rental income were in fact lower than they should have been when considering property prices.

This is true for many of the other capital cities as well, and is a sign that renting could the far more affordable option in relativity to housing prices.

Stable rates

Another good reason to look at houses for rent is the fact that rates have been mostly stagnating. Australia’s combined capital cities experienced a 0.7 per cent decline in rates over the September quarter, with every single one recording negative change.

Melbourne has lead the charge in rental growth over the year, showing a 2.1 per cent rate increase in the year to September but clearly, this figure is hardly something to worry over.

With stable rates that are lower than property prices would have them, anyone who may struggle with mortgage repayments should consider renting instead.

If you were looking for one controversy that has excited debate in the property market over the past few months, it’s stamp duty. The contentious tax has been brought into discussions about housing supply, affordability – even the recent debate on foreign investment has touched on the role of this tax. Fortunately for those buying a house or land for sale, it looks like the writing could be on the wall for this lucrative levy.

In an address in Melbourne, Treasurer Joe Hockey made his position clear on tax reform, pointing out that state and territory governments need to look elsewhere for sources of income. He highlighted that it is one the nation’s most inefficient and inequitable taxes, and set the challenge to develop another way of raising revenue.

Finding an alternative

If you were looking for a little perspective on why stamp duty has become the hot topic, new research from the Housing Industry Association (HIA) should provide it.

The HIA’s winter 2015 edition of the Stamp Duty Watch report shows that the typical stamp duty bill on buying a house now amounts to over $20,000 on real estate in Cairns, Melbourne and Sydney, and has increased significantly in both NSW and Victoria over the past year or so.

“Independent research conducted for HIA last year provided compelling evidence of the benefits to Australian living standards and economic growth from the replacement of stamp duty with more efficient, broad-based revenue raising measures,” said Shane Garrett, economist at the HIA.

GST in, stamp duty out

The Property Council of Australia has also pointed out that while governments need to focus on substituting the levy, it needs to go hand in hand with a range of tax changes. In particular, Chief Executive Ken Morrison pointed out the GST reforms should be on the table.

In fact, a new Property Council survey uncovered strong support for increasing GST and abolishing stamp duty, which could indicate the direction that governments will go in the future. Around three quarters of those surveyed believed it was inevitable that GST will rise over the next 10 years, and over two thirds of people supported stamp duty being removed.

“Some 65 per cent of respondents believed the GST to be fair or very fair, and only 35 per cent as unfair, with most citing its benefit as a tax that cannot be dodged,” Mr Morrison said.

With public support firmly behind the abolition of stamp duty, only time will tell whether governments take this on board. If they do, those buying real estate in Australia are sure to reap the rewards.

In July, capital city home values increased for a second consecutive month, recording a jump of 0.6% following June’s 1% rise.

This brings five consecutive quarters of declines to an end, possibly signalling that Australia’s property market has now bottomed.

With many other market metrics suggesting a turning point, don’t wait any longer to buy if you’re trying to pick the bottom. With the volume of property for sale decreasing and demand increasing, prices must inevitably rise.

The New Homes Building sector may provide a solution to Australia’s sluggish start to the property market for 2012, especially if associated regulatory and government taxes were reduced.

As a key barometer for the health of the domestic economy, and often a driver for first home buyer activity, the new home building sector needs more than just low interest rates to sustain improvements in conditions. Something needs to be done at the policy level.

An industry report released in February this year showed a decline of 7.3 per cent in seasonally adjusted new home sales in January, with Victoria experiencing the sharpest decline of 19.6 per cent.

The report also showed a decline in detached house sales for NSW and SA as well, which further weakened results, but strengthened the case for government action.

A real opportunity exists for governments to set the new home building agenda and look at policy reform that will reduce new home building taxes.

Up until now, both state and federal governments have relied on Victoria to prop up this segment of the Australian market, but the results show they can no longer do that. It is up to governments to show leadership and do something.

Policy reform, especially reducing taxes and costs for home building would have a multiplier effect. It would attract people in a financial position to build a new home, and have the knock on effect of increasing economic activity through jobs and sales activity.

A reform of state taxes is being called for by First National, particularly inefficient ones like stamp duty which is proving too taxing for working families to pay.

Stamp duty is nothing more than governments gouging money from those who can least afford to pay – working Australian families.

We are already proven to be one of the most expensive property markets in the world and excessive property taxes, like stamp duty, is making it incredibly difficult for new entrants to gain access to the market or for existing home owners to upgrade.

The situation with the Australian property market is becoming untenable and needs to be addressed at a national level.

At a time when rents are soaring, vacancy rates are tight and there is a shortage of supply, there is a real potential that more Australian families will be forced onto the streets – increasing homeless rates and welfare payments and further adding economic stress to the Australian economy.

Serious consideration needs to be given to addressing the problems with the Australian property market if there is going to be hope for future Australians to realise home ownership dreams.

Plus, as the Henry Review points out, transaction taxes such as stamp duties reduce economic efficiency, either by discouraging turnover or being embedded in the cost of production, which just increases the problem.

With winter and the election now part of history, spring is the time for the property market to spring into action. There is money to be made and the home garden is a great place to start.

Well maintained and landscaped gardens can add 10 per cent, or more, to a property’s value – so plant now in the Springtime and see home values grow.

Make first impressions count: stand at the front of your property and view it with a critical eye for areas of improvement.

Keep it simple: make sure there is still plenty of opportunity for buyers to make their own stamp on the garden.

Know your product: maximise the appeal of your garden’s best assets and know who your buyer will be, so your garden can be planned to meet their needs.

Native drought tolerant gardens are increasing in popularity, but the desire for colour is still strong. Colour is an effective way to create and reflect moods – so use it to its greatest effect. Visit First National Real Estate Burnie’s website for more tips on designing and planting a native, drought tolerant garden.

For immediate results, neaten up the garden by mowing the lawn, trimming edges, adding some mulch and storing away toys and personal items.

First National Real Estate CEO, Ray Ellis, welcomed the Prime Minister’s appointment of a new Minister for Population, saying he hoped appropriate action would finally be taken in addressing challenges facing the property market.

“We have been calling for some time for a consistent unified and national approach to the property market,” Mr Ellis said.

“It is heartening to see someone in the government now taking responsibility for this and I hope they will take into account all the relevant factors, not just an isolated few.

“The issues we face as an industry are not limited to population growth, although it is a key driver of the property market.

“Other considerations include protracted, complicated and inappropriate planning processes, high taxes and imposts and the whole supply versus demand issue which is producing a chronic shortage of supply for this country in basically every state.”

According to Mr Ellis, if the government, and in particular, the new Minister for Population are really serious about making sure Australia is ready and well prepared for projected population growth in the next 50 years, they need to ensure representatives from all areas of the industry have a say in what is happening and how the future should look.

“There should be an appropriate forum established where key players in the industry are able to voice their opinions and concerns and put all matters on the table,” Mr Ellis said.

“Then, a vehicle should be created to drive the necessary changes forward. Real estate is an industry that dominates government revenues, as demonstrated by the New South Wales Government’s recent tax windfall of 600 million dollars in unbudgeted stamp duty.

“This is on top of the reported $1 billion bounce in state and territories’ budgets as a resurgent property market boosts stamp duty receipts around the nation.”

Mr Ellis said the critical component was getting strong representation of appropriate industry members, and not just limited to the usual suspects.

First National Real Estate CEO, Ray Ellis, supports the call from the Australian Local Government Association for a national planning authority but says Australia’s problems with its planning processes go far beyond the single issue of coastal climate change planning and require a major overhaul.

“It’s very myopic to just consider this one issue in isolation of what is happening in other areas of the property market around this country,” Mr Ellis said.

“In Queensland, they are working off two year old planning approvals, while NSW planning approvals have dropped dramatically in recent times.

“And, while Victoria has just posted strong planning approval figures for some years, this is a result of a minister wielding a big stick rather than systemic structural changes.”

Mr Ellis agreed that the confusion created by inconsistent sea level rise predictions makes planning and development increasingly difficult on coastal regions, but more importantly have the potential to impact negatively on the property market in general.

“Home owners and other property market pundits need certainty around property prices so that they can make decisions based on facts and consistent information,” Mr Ellis said.

“It’s all well and good to say that the responsibility for planning rests with state and local government, but ultimately, a consistent, unified and national approach needs to be considered in the property market.

“This is unsustainable and I can’t think of any other industry that would operate with this level of uncertainty and confusion.”